Unemployment Is Not The Fault Of The Unemployed

I had a discussion recently in which the person I was speaking with suggested that unemployment is the fault of the unemployed. While this may be true in certain individual cases, this post argues it is not the general rule.

To set the scene for this argument, I need to define a few things. First is the concept of full employment. Full employment is a term used in macroeconomics which means the maximum number of people who can work are in work. It’s generally somewhere near 0% unemployment, but is never 0%, as there are always people between jobs, unable to work due to their circumstances, or who are wealthy enough to not need to work. In New Zealand, I suggest an accurate level for this is maybe around 1% unemployment. I draw this figure from Treasury records which put unemployment at a bit below 1% in the 1970s when New Zealand had arguably more jobs than people.

Second, the process I’ll use in my argument. Since I am arguing against the position that unemployment is the fault of the unemployed, I will draw some conclusions which should be seen if this is the case. These conclusions will then be checked against the data.

We can assume that an individual’s desire to work remains constant across years. We can also assume that any variation across a lifetime averages out across individuals. So given our assumption that unemployment is the fault of the unemployed, we should see a relatively flat line in the unemployment rate:

We don’t see the flat line we expected, so there must be some other factors more greatly affecting the unemployment rate than workers’ desire to work.

The obvious counter-argument to this is that it’s a generational shift, where people from different generations have different work-ethics. If this is true, the variation should come primarily from the retirement of previous generations, and the emergence of newer generations into the working population. The result we should see is a fairly flat line for each generation, perhaps decreasing as fewer members of each generation are able to work.

Instead of seeing the flat lines we expected, we see lines which quite closely follow the same trend. In fact, any large change in unemployment seems to show up across all generations in the graph.

An interesting aside: from the data, it appears that younger generations have a much harder time in finding employment, even when comparing those who were 15-19 in 1986 to those who were 35-39 in 1986. However, it’s worth noting the data is slightly skewed in the older two generations for the last 5 or so years in the table.

Conclusions:

It appears that unemployment is not a result of generational differences, and it’s not a result of the desire of a certain group to not work. The question which surely follows is what causes unemployment?

The general answer is relatively straightforward: government policy. In the 1970s, governments across the world began to adopt neoliberal policies, destroying workers’ rights and thrusting our economies into a global market. The result of this is we now have a workforce beholden to a global class of bosses. The financial wheelings and dealings of these business elites have a far greater effect on our markets and employment rates than they did before.

Global economic trends hugely influence our unemployment rates. The crises of the 1970s, including the oil shocks of 1973 and 1978 pale in comparison to the huge jumps in unemployment as a result of the recession in the early 1990s and the great recession of 2008.

The New Zealand economy of the 1970s shows what a full employment economy looks like. While the oil shocks of that decade certainly affected the unemployment rate, the overall trend was one of recovery and certainty. Our economy in recent decades paints a far different picture. Unemployment is never stable, and the job market is hugely affected by global crises.

Since we have shown that the actual desire of the unemployed to work is not borne out by the employment rate, we can safely say that our economy is one which does not provide jobs for everybody. It’s a conscious choice we’ve made, to shift our economy to one vulnerable to the ravages of the global economy.

Nice work! I wonder what the past decade of welfare changes have done to that figure. Living conditions have definitely become worse for people living on welfare, I wouldn’t be surprised if this resulted in more people giving up on looking for work instead.